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M&A at a Glance (April 2016)

Despite an encouraging February, M&A activity in March 2016 resumed its recent downtrend across all metrics, both in the U.S. and globally. In the U.S., overall monthly deal volume fell by 36.9% in March 2016 to $63.68 billion. This is the lowest monthly volume for U.S. deals since March 2014. The total number of deals and average deal size also declined in the U.S., by 17.6% to 711 and by 19.4% to $229.9 million, respectively. Global M&A performance was comparable, with global deal volume dropping by 27.2% to $224.23 billion, the number of transactions decreasing by 6.6% to 2,867 and average deal size declining by 28.9% to $143.8 million. These declines applied across the board to both sponsor and strategic transactions. Sponsor-related activity declined in the U.S. by 53% to $15.88 billion and globally by 33.1% to $41.95 billion. Strategic-related activity declined in the U.S. by 28.8% to $47.79 billion and globally by 25.7% to $182.28 billion. Figure 1.

Crossborder activity also declined across all metrics in March 2016. Inbound U.S. deal volume declined by 18.4% to $23.42 billion (and the number of inbound deals declined by 3.7% to 129). Outbound U.S. activity fared worse, declining by 31.4% to $16.57 billion in volume and by 32.4% in number of deals to 96. Global crossborder deal volume by dollar value declined by 44.4% to $86.53 billion and by 10.6% in number of deals to 690. Figure 1. Canada maintained its monthly and annualized lead positions as the country of origin for U.S. inbound activity, as measured by both total dollar value ($14.9 billion) and number of deals (32 transactions). As for outbound U.S. crossborder transaction volume, the United Kingdom took the lead with $9.02 billion, while Canada maintained its top position for number of deals, with 18 for March 2016. Figure 3.

Utility & Energy preserved its top spot as the most active target industry in the U.S., with $14.15 billion in volume. Computers & Electronics remained the leader for number of deals in the U.S., with 203 in March 2016. As measured over the last 12 months, Healthcare continues to be the most active industry by volume ($496.16 billion) followed by Computers & Electronics ($346.34 billion). Figure 2.

Reports indicate that withdrawn transactions are on the rise, as may be shown by the withdrawal of two of the five largest announced U.S. public mergers in March 2016 - the proposal by the investment group of J.C. Flowers & Co. LLC, Primavera Capital Group Ltd. and Anbang Insurance Group Co. Ltd to acquire Starwood Hotels & Resorts Worldwide, Inc. for $13.96 billion and the offer by Origin Technologies Corp. to buy Affymetrix, Inc. for $1.37 billion. Figure 5. Target break fees (3.2%) and reverse break fees (5%) each remained in line with their respective averages for the last 12-months (3.6% and 5.3%, respectively). Figure 7. For the first time since the inception of this publication (April 2012), the form of consideration for every surveyed U.S. public merger has been all-cash, as compared to an average of 55.6% over the past 12-months. Figure 9. The incidence of tender offers as a percentage of U.S. public mergers increased to 12.5% in March 2016. Finally, we note that the incidence of hostile offers as a percentage of U.S. public mergers increased to 27.3% of U.S public mergers, as compared to its 12-month average of 16%. Figures 11 and 12.

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